US Markets Round-Up
This week, the Russell 3000 index, an important benchmark of the US stock market across market capitalizations, started on a negative note and continued the negative momentum for the entire week. The index settled at 2688.85 with a week-to-date (WTD) loss of ~0.77 percent on December 02, 2021. Other major indices such as S&P 500 and NASDAQ Composite also showed downside movement for the week. On December 02, 2021, the S&P 500 index settled at 4577.10 with a WTD loss of ~0.38 percent, while NASDAQ Composite Index settled at 15381.32 with a WTD decline of ~0.71 percent.
The US market reacted negatively due to concerns of the first US omicron case, and Federal Reserve Chairman Jerome Powell hints winding down monthly asset purchases more quickly than planned. According to the weekly data published by the US Department of Labor, the seasonally adjusted US Initial jobless claims data increased by 28,000 to 222,000 for the week ending November 27, 2021, against the initial claims at 194,000 in the prior week.
Having understood the US market performance over the week, taking cues from major global news, and based on our technical analysis of the Russell 3000 index for the upcoming week, now let us have a look at the two NYSE listed stock picks from the technical standpoint. Noted below are our recommendations based on generic insights, entry price, target prices, and stop-loss for PulteGroup Inc (NYSE: PHM) and Stoneridge Inc (NYSE: SRI) for the next 2-4 weeks duration:
PulteGroup Inc
PulteGroup Inc (NYSE: PHM) is a home builder company. The company is engaged in Homebuilding and Financial Services. Noted below are the key price indicators for the stock:
Price Action Analysis (on the Weekly Chart)
PHM broke a falling wedge pattern on the upside on November 09, 2021, and since then has been trading above the breakout level, indicating an upward trend for the stock. The recent upside movement in the stock is backed by increasing volumes, further supporting a positive bias. Now the next crucial resistance level for the stock appears at USD 59.84, and it may test this level in the short-term (2-4 weeks). A further movement above USD 59.84, backed by volumes, may extend buying in the stock.
Technical Indicators Analysis (On the Weekly Chart)
On the weekly chart, RSI (14-period) is trading at 53.75 levels, indicating a positive trend for the stock. The weekly volumes also seem supportive of the upside movement. The CMP is above the trend following indicators 21-period SMA and 50-period SMA, further supporting an up move.
Financial Summary
Summary of the Key Financial Metrics for the past four years for PulteGroup Inc is as follows:
General Recommendation
As per the above-mentioned price action and technical indicators analysis, we can conclude that PulteGroup Inc is looking technically well-placed on the chart. Therefore, we have a 'Buy' rating on the stock. Investment decisions should be made depending on an investor's appetite for upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report. The summary of our recommendation is as follows:
Stoneridge Inc
Stoneridge Inc (NYSE: SRI) is a designer and manufacturer of engineered electrical and electronic components. Noted below are the key price Indicators for the stock:
Price Action Analysis (on the Weekly Chart)
On the weekly chart, SRI stock prices are sustaining above the rising trendline and continuously taking support of the same. After taking the support of the trendline, the price has witnessed an upside rebound. Now, the next resistance level appears to be at USD 26.80, and the stock may test that level in the short term (2-4 weeks).
Technical Indicators Analysis (On the Weekly Chart)
On the weekly chart, RSI (14-period) is recovering from lower levels and currently trading at 46.86, indicating a positive trend for the stock. The weekly volumes also seem supportive of the upside movement. However, the CMP is below the 50-period SMA that may act as the resistance levels for the stock.
Financial Summary
Summary of the Key Financial Metrics for the past four years for Stoneridge Inc is as follows:
General Recommendation
As per the above-mentioned price action and technical indicators analysis, we can conclude that Stoneridge Inc is looking technically well-placed on the chart. Therefore, we have a 'Speculative Buy' rating on the stock. Investment decisions should be made depending on an investor's appetite for upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report. The summary of our recommendation is as follows:
Upcoming Major Global Economic Events
Market events occur on a day-to-day basis depending on the frequency of the data and generally include an update on employment, inflation, GDP, consumer sentiments, etc. Noted below are the upcoming week's major global economic events that could impact the Russell 3000 Index and stocks' prices:
Investment Related Risks: Based on the technical analysis, the risks are defined as per risk-reward ratio (~0.60:1.00), however, returns are generated within 2-4 weeks' time frame. This may be looked at by Investors with sufficient risk appetite looking for returns within short investment duration. Investment recommendations provided in this report are solely based on technical parameters, and fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, and social and political instability risks etc.
Entry Price: For the given recommendation(s), Entry Price is assumed be at or above a certain level. However, a slight deviation on either side in the 'Entry Price' can be considered depending upon the potential expected or indicated.
Note 1: Investors can consider exiting from the stock if the Target Price or Stop loss mentioned as per the technical analysis has been achieved and subject to the factors discussed above.
Note 2: How to Read the Charts?
The Green colour line reflects the 21-period moving average while the red line indicates the 50- period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.
The Black colour line in the chart's lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.
The Blue colour bars in the chart's lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps in easier and faster execution of the order.
The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
Risk Reward Ratio: Risk reward ratio is the difference between an entry point to a stop loss and profit level. We suggest ~60% Stop Loss of the Target 1 from the entry point.
A trailing stop-loss is a modification of stop-loss in case of favourable movement in the price to protect the gains. We suggest Investors to Trail the Stop-Loss as per the aforementioned levels if the stock price achieves more than 60% of the Target 1. Investors should consider exiting from the position as per the Trailing Stop-Loss level if the price starts moving downwards after achieving more than 60% of the Target 1.
The reference date for all price data, volumes, technical indicators, support, and resistance levels is December 02, 2021. The reference data in this report has been partly sourced from REFINITIV.
Abbreviations
CMP: Current Market Price
SMA: Simple Moving Average
RSI: Relative Strength Index
USD: United States dollar
Note: Trading decisions require a thorough analysis by investors. Technical reports in general chart out metrics that may be assessed by investors before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.
Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.
Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.
There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.
You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.
The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.
Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.
Please also read our Terms & Conditions and Financial Services Guide for further information.
On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.
Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.